So now Congress worries about Main Street's 'Little Guy'

Sep. 28, 2008

Artist Geoffrey Raymond stands next to a rendering of former Lehman Brothers CEO Richard Fuld outside the company's headquarters in Manhattan on Sept. 15. Raymond was asking Lehman employees to write comments about the company on the portrait. / Seth Harrison/The Journal News

Written by

Herb Pinder

It looks like we're going to dodge a bullet, not all the rigmarole over the economy. That will continue long after Congress has drowned in a river of faux populist tears. Typical of the lawmakers' new-found regard for the "Little Guy" of Main Street (not your Main Street, but rather the metaphorical Main Street far, far away from Wall Street) were comments late Friday from Rep. Mike Pence, R-Indiana, on conservative House Republicans' opposition to the Wall Street bailout plan then being bandied about, "The interests of the average American taxpayer must come first." A somber Pence then added, in his appearance on the The NewsHour with Jim Lehrer, "we really do believe Wall Street ought to have a hand up and not a handout. And I believe the majority of the American people are with us on that."

Before reaching for the Kleenex, note that Pence, with nary a trace of irony, then recommended easing the burden on Mr. Guy, by trimming the capital gains tax, a benefit that accrues overwhelmingly to the rich - just 3 percent of tax filers in 2006, people with incomes over $200,000, accounted for 83 percent of the reported capital gains; just one-third of 1 percent of filers, taxpayers with incomes over $1 million, accounted for slightly more than 60 percent of the capital gains.

So that's what looking after the interests of the average American taxpayer looks like in the capital. Typically, sentiment is about all that Washington can muster. Somehow, though, in this whirlwind of economic meltdown, brought on by the overlapping failures of market regulators and Congress, the abuses of lenders, the naivete and chicanery of borrowers, the widespread greed in board rooms and on Wall Street, not to mention the role of an incurious White House - amid all of the foregoing, Washington's leadership has managed to elude out and out class warfare. Granted, lawmakers have had to throw some of our neighbors - that would be Wall Street "fat cats" - under the bus during the bailout talks, taking aim at the executives' golden parachutes and such, but these sacrifices to the Main Street mobs have been a small price to pay for avoiding a wider conflagration, one that would reach lawmakers.

Here's some data on how average American taxpayers rated before the bailout talk, and before Bear Stearns, AIG, Lehman Brothers, WAMU et al. fell on their faces - the grim figures from a variety of sources, including the Tax Policy Center, Congressional testimony, the Census Bureau and the Center on Budget and Policy Priorities:

- Congress, between 2001-2006, enacted tax cuts totaling more than $2 trillion, with the benefit disproportionately concentrated among the rich. Those in the lowest quintile of taxpayers - that is, the bottom fifth of taxpayers - on average saved $20 in taxes in 2006. Taxpayers in the middle quintile pocketed much more, an average benefit of $744 - but only about an eighth of the average $5,790 savings that went to those in the very top quintile.

- Meanwhile, the richest 0.1 percent - that is, 1 in every 1,000 taxpayers - saw both the highest average increase in after-tax income gain (6.2 percent) and the highest average annual tax savings, $230,136.

- The top quintile of taxpayers - the one-fifth at the very top of the heap - took home 71 percent of the tax-cut benefits doled out by Congress; the top 10 percent took home 55 percent of the benefits, while the charmed top 1 percent shared 27 percent of the benefits.

- Fueled by those tax cuts, the top quintile's share of all earnings in 2006 reached 49.7 percent - higher than any other year since 1917; the very special top 1 percent captured almost three quarters of all income growth.

- Locally, 20 percent of households in Westchester in 2007 earned nearly 60 percent of the county's aggregate income; the bottom quintile earned less than 3 percent. The top 5 percent of Westchester households accounted for 30 percent of income. In Rockland, the top 20 percent of households accounted for half of the income; in Putnam, the top 20 percent took home 44 percent of income.

- The costs of the 2001-2006 tax cuts will trickle down for years to come. While the federal budget ran a surplus of $127 billion in 2001, the year George W. Bush took office, the U.S. budget deficit for fiscal 2008 is expected to more than double the deficit for 2007, reaching $407 billion.

- Last month, the Center on Budget and Policy Priorities concluded that, despite remarkable worker-productivity gains, "This marks the first time on record that poverty and the incomes of typical working-age households have worsened despite six consecutive years of economic growth. The new data show that in terms of poverty and median income, the economic expansion that started at the end of 2001 was the worst on record."

Americans of all stripes have reason to be angry about what's happening on Main Street and Wall Street; the wrongful conduct and the negligent conduct are causing hardship throughout the economy. But these dire, unintended consequences - bank failures, business and personal bankruptcies, foreclosures, multi-billion-dollar bailouts, etc. - are only correlaries to the ill-considered affirmative taxation and spending decisions made by Washington over time, in plain view, and with little regard to their long-term toll on the interests of the vast number of Americans, on whatever street they live.